3 Points: Comptroller Guidance. Caution Schools on Capital Appreciation Bonds.

Comptroller Hegar issued a press release warning caution for capital appreciation bonds. Let’s find out why:

• Capital Appreication Bonds, CABs, are a financial tool that fast growth schools use, but have a high price  in the long term 
• Can be costly to taxpayers when the eventual lump sum payments come due for the school district
• The compounded interest of CABs make the funding option much more expensive and heavy use can result in lowering a district’s debt rating

Supporters of CABs say:

• CABs are necessary “because of the state’s limit on bond debt”

Fiscal Notes March 2016 | Capital Appreciation Bonds

Comptroller Press Relase March 8 2016 | Texas Comptroller: Approach Capital Appreciation Bonds With Caution